Panasonic prepares for "garage sale", to axe 10,000 jobs

By Tim Kelly and Reiji Murai

Published November 14, 2012

Reuters

KADOMA – About a fifth of Panasonic Corp's <6758.T> 88 business units are losing money and only half so far meet a target for at least 5 percent operating margin, the Japanese electronics group's finance chief said in an interview on Wednesday.

Hideaki Kawai said the country's biggest commercial employer will axe another 10,000 jobs by end-March as it pares its costs and looks to return to profit. Panasonic shed 36,000 jobs last business year, some through the sale of businesses.

"Our new boss has said businesses must achieve at least a 5 percent operating profit target within three years," Kawai said, referring to Kazuhiro Tsuga, who took over as company president in June. "But we won't wait that long to tackle units that need to be dealt with."

Sell-offs and business closures will start as early as next year, he told Reuters at Panasonic's headquarters in Kadoma, near Osaka in western Japan.

Kawai said Panasonic aims to earn group operating profit of at least 200 billion yen ($2.52 billion) in the year to end-March 2014 - in line with forecasts by analysts polled by Thomson Reuters StarMine.

Panasonic warned last month it will lose close to $10 billion in the year to March as it writes off billions of yen in tax-deferred assets and goodwill related to its mobile phone, solar panel and small lithium battery businesses. It also put aside money to cover the lay-offs and other restructuring measures.

Panasonic plans to offload assets worth 110 billion yen before the end of March, mainly land and buildings in Japan, Kawai said. More assets sales will follow from next business year if needed to bolster cash flow.

Panasonic's 'garage sale' comes ahead of a turnaround plan that Tsuga has promised to unveil by end-March, which will be the start-line to offload underperforming businesses. As financial chief overseeing hundreds of accountants spread across a sprawling conglomerate, Kawai plays a key role in helping Tsuga identify which businesses to close, sell or merge.

Selling businesses and offloading other assets should boost Panasonic's cashflow and help pay for the latest restructuring at a company that began in 1918 making electrical socket extensions and bicycle lamps, and now employs 300,000 workers.

Panasonic shares, already trading near multi-decade lows, slumped by almost a fifth on November 1 on the loss forecast, and Standard & Poor's has cut its credit rating to close to junk. The stock closed up 0.8 percent on Wednesday, ending a four-session losing streak.

Ahead of its earnings revision, Panasonic won $7.6 billion in loan commitments in October from banks including Sumitomo Mitsui Financial Group <8316.T> and Mitsubishi UFJ Financial Group <8306.T>, a funding backstop it says will help it avoid having to seek capital from credit markets.

"Panasonic's debt holders are concerned and it is critical for us to improve our finances," Kawai said. Panasonic this year aims to cut net debt to 770 billion yen from 1.08 trillion yen and will look for another 200 billion yen improvement next business year.

Japan's big banks have also provided TV rival Sharp Corp <6753.T> with $4.6 billion in emergency loans, though the maker of Aquos TVs warned this month it may not survive alone as it expects a $5.6 billion net loss this business year.

Japan's other ailing consumer electronics brand Sony Corp <6758.T>, inventor of the personal music player, lowered its target for its handheld PSP and Vita games consoles, TVs and digital cameras, but did maintain its annual forecast, helped by the sale of a chemicals business. ($1 = 79.4400 Japanese yen)